Posts Tagged ‘RICO’

No Org Chart Required: RICO “Enterprise” Needn’t Be Distinct from its Activities

Monday, June 8th, 2009

no-org-chart-required.png

In a solid 7-2 decision this morning, the Supreme Court ruled that jurors in a RICO case can infer the existence of a racketeering enterprise simply based on its activity, and don’t need evidence of any separate structure or hierarchy.

This clears up some misconceptions that have been floating around for a while about what the RICO statute actually says. We’ve always thought that the language was fairly straightforward, but have been amazed at the variety of interpretations we’ve heard from prosecutors, defense attorneys and judges.

Writing for the majority in Boyle v. United States, Justice Alito ruled that an enterprise must have a structure of some kind, but not necessarily one that is separate and distinct from that “inherent in the pattern of racketeering activity in which it engages.”

Boyd was one of several people who took part in dozens of bank robberies across several states in the early 1990s. There was a “core group” of conspirators, and others would be brought in as needed. The crimes followed a pattern, but the offenders weren’t formally organized. It was a loose and informal association, without any hierarchy or long-term arrangement.

At trial, Boyd’s judge told the jurors that the government had to prove the existence of a RICO enterprise by proving that:

(1) There [was] an ongoing organization with some sort of framework — formal or informal — for carrying out its objectives; and

(2) The various members and associates of the association function[ed] as a continuing unit to achieve a common purpose.”

The judge also told the jury that it could:

find an enterprise where an association of individuals, without structural hierarchy, [had been formed] solely for the purpose of carrying out a pattern of racketeering acts;

[and that]

Common sense suggests that the existence of an association-in-fact is oftentimes more readily proven by what it does, rather than by abstract analysis of its structure.

Hewing to a common misconception about what RICO requires, Boyd’s counsel wanted instead an instruction that the government had to prove that the enterprise had:

a) An ongoing organization;

b) A core membership that functioned as a continuing unit; and

c) An ascertainable structural hierarchy distinct from the charged predicate acts.

But the judge’s instruction came almost straight out of the Supreme Court’s decision in U.S. v. Turkette, 452 U.S. 576 (1981), which held that “an enterprise includes any union or group of individuals associated in fact,” and that RICO targets “a group of persons associated together for a common purpose of engaging in a course of conduct.” Such an enterprise could be “proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.”

The newly-clarified rule of this case is that:

(1) An enterprise must have a structure. This essentially means that there have to be different parts that make up the whole, as well as a pattern of relationships among the members of the group.

An association-in-fact enterprise (one that exists without having been formally established as a legal entity) must have at least three structural features (though the word “structure” is not necessary in jury instructions). These features are: (1) A purpose; (2) Relationships among those associated with the enterprise; and (3) Longevity sufficient to permit the associates to pursue the enterprise’s purpose.

There is no requirement that a structure must have a hierarchy. Nor need there be role differentiation, a unique modus operandi, a chain of command, professionalism and sophistication of organization, diversity and complexity of crimes, membership dues, membership rules and regulations, uncharged or additional crimes aside from predicate acts, an internal discipline mechanism, regular meetings regarding enterprise affairs, an enterprise name, or induction/initiation ceremonies and rituals. All that is required is a continuing unit that functions with a common purpose, no more.

(2) It is redundant and misleading to require a jury to find the existence of an “ascertainable structure.” If a jury finds that there was a structure beyond a reasonable doubt, then of course it was ascertainable, because they found it. Requiring this extra verbiage implies that the structure be something more than what is required.

(3) The existence of an enterprise is, of course, a separate element to be proved. That does not mean, however, that the existence of the enterprise must be separate from the racketeering activity in which it engaged.

This stuff isn’t rocket science. It’s not even Logic 101. But we’ve heard prosecutors, judges and defense counsel mangle this often enough that the Court’s clarification today is refreshing.

* * * * *

Speaking of mangling, however, two Justices did dissent. Stevens was joined by Breyer in opining that an “enterprise” refers only to “business-like entities that have an existence apart from the predicate acts committed by their employees or associates.”

This is the most common of the misconceptions we’ve come across regarding RICO. Still, it is surprising to hear it come from two such respected jurists. We think Stevens and Breyer do know better.

Stevens has been doing a lot of forceful dissenting in this term, and that has long led us to believe he’s putting the finishing touches on his legacy before retirement. If anyone had announced their retirement this term, we’d have certainly expected Stevens rather than Souter, for this reason alone. We still believe, however, that he’s preparing for retirement, and wants to get his jurisprudence out there.

On this matter, however, we don’t see this particular dissent coming back to form the basis of a new rule somewhere down the road. He focuses on an interpretation of Congress’ intent when it drafted the statute, an interpretation that is dubious at best. And he makes the unfortunate mistake of conflation: the existence of an enterprise is a separate element of the offense, and so therefore the enterprise must exist separately from its activities.

In other words, an enterprise that does nothing else but work to achieve its criminal ends cannot be a RICO enterprise. That’s just absurd. And that is certainly not what Congress intended.